Gold holds gains after US fiscal deal

Gold was mostly unchanged on Thursday, holding on to gains from the previous session when a last-minute deal to avert a US fiscal disaster drove prices to a two-week top, although caution remained over upcoming tough budget negotiations.

Commodities made a strong start to the new year by hitting multi-week highs on Wednesday after the US Congress passed a bill that raises taxes on wealthy individuals and families, sparing middle- and low-income earners.

But it left unresolved another sticky issue involving US$109bn in planned military and domestic spending cuts, promising more political showdowns on the budget in coming months. 

Gold typically benefits from economic uncertainties given its safe-haven status, but considering many investors have both equities and gold in their portfolios, bullion has also been closely watching movements in stock markets that have rallied on the US fiscal deal.

Gold hit a high around US$1,689 an ounce and was at US$1,686.35 by 0350 GMT, unchanged from Wednesday. It hit a two-week high above US$1,690 in the previous session. Gold ended up around 7 percent in 2012 - the 12th straight year of gains, making it one of the longest bull runs ever for a commodity.

"Precious metals are currently tracking equities, however they are stuck within the next trading range. For gold, it will need to breach US$1,695 before it can actually have another upward trend to break above US$1,700," said Brian Lan, managing director of GoldSilver Central Pte Ltd in Singapore.

"For silver, it has to break US$31.60." US gold for February fell US$1.70 an ounce to US$1,687.10.